SALT LAKE CITY> (
reported a much narrower than expected loss for its first quarter amid improved net interest margins and a decline in its provision for loan losses.
The company said its net loss came in at $86.5 million, or 57 cents a share, for the first quarter, well ahead of the average estimate of analysts polled by
for a loss of 99 cents per share in the March period.
The performance was also much better than respective net losses of $176.5 million or $1.26 per share, for the fourth quarter, and $852.3 million, or $7.47 a share, in the same period a year earlier. The great majority of the first quarter 2009 net loss sprang from non-cash impairment charges on goodwill, to reflect the reduced value of acquired assets.
The results for each period reflect the impact of the payment of preferred dividends. Zions said it paid $26.3 million in dividends in the latest quarter on preferred stock, including the $1.4 billion worth of preferred stock held by the U.S. government related to bailout money received in November 2008 via the Troubled Assets Relief Program, or TARP.
While overall asset quality continued to decline during the first quarter, the company's results were boosted by a decline in its provision for loan losses to $266 million from $391 million in the fourth quarter and $298 million a year earlier.
Net charge-offs totaled $227 million during the first quarter, and the company's annualized ratio of net charge-offs to average loans was 2.37%. Loan loss reserves covered 4.20% of total loans, staying well ahead of the pace of loan losses.
Also contributing to the company's improved bottom line was a reduction in securities impairment charges on collateralized debt obligation (CDO) securities to $31.3 million, from $99.3 million the previous quarter and $82.7 million a year earlier.
Zion's net interest margin - the difference between a bank's average yield on loans and investments and its average cost of funds -- rose to an annualized 4.03%, up from 3.81% in the fourth quarter. While industry aggregate figures are not yet available, the company's margin measured up quite well compared to the fourth-quarter national aggregate of 3.49%, as reported by the
Federal Deposit Insurance Corp.
Despite the continued losses, the company's capital ratios have held up, reflecting not only the TARP infusion, but also a reduction in assets and increase in common equity from share issuances and conversion of debt. Its Tier 1 leverage ratio stood at 10.90% and the total risk-based capital ratio was 13.68% as of March 31. These are well ahead of 10% required by regulators for most banks to be considered
CEO Harris Simmons noted the increase in the net interest margin and was "encouraged by recent credit trends," saying the company was "pleased that both our allowance for credit losses and our capital ratios continued to strengthen this quarter."
Zions shares closed at $25.43 Monday, returning 98% year-to-date.
Written by Philip van Doorn in Jupiter Fla.
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.